Poor contractor performance costs Navy upwards of $20 million

Sailors aboard the USS George Washington had been at sea for a month when they finally reached Brisbane, Australia. While they were no doubt excited to enjoy themselves on dry land, they were stuck onboard for six hours while a contractor, Glenn Defense Marine Asia, hunted for a runway.

This wasn't an isolated incident for the beleaguered company. Earlier this year, it was dressed down by the Philippine Senate for dumping untreated sewage from Navy ship into protected waters.

Despite these embarrassments, the contractor continued to get work. Just two days after the runway fiasco, the firm was awarded a $1 million contract extension to provide port services.

While the Navy eventually terminated its relationship with Glenn Defense in September, the damage was already done. The company had contracts worth up to $200 million, which were determined to have major loopholes exploited by the unscrupulous builders. It also inflated fuel prices by over $3 million across five purchases, all in the fall of 2011. In total, the malfeasance is estimated to have cost the United States armed forces over $20 million.

One major issue was naivety about local business practices and pricing. By luring officials to unknown areas, they were able to bilk them out of untold amounts of dollars.

The whole ordeal underscores how important it is to know whom you're dealing with, and to obtain some sort of fiscal protection. Short of wiping off a crystal ball, it's possible to know how a building job will turn out before it starts. However, contractor surety bonds are a good way to ensure that you're not financially liable for something that fails to meet the standard described in the contract.